Deepening Inequality Driving US Middle Class into Oblivion

A closer look at the shift out of the middle reveals that “a deeper polarization is underway in the American economy,” says Pew Research Center report. (Image: DonkeyHotey/flickr/cc)

The American middle class is shrinking.

For the first time in more than four decades, middle-income households have lost their majority status in the U.S., according to new findings, and are now outnumbered by their counterparts on opposite ends of the income spectrum.

“The fastest-growing segments are the ones at the extremes, the very lowest and highest ends of the income distribution.”
—Pew Research Center

Based on the definition used in the Pew Research Center report released Wednesday, the share of American adults living in middle-income households—that is, with an income that is two-thirds to double that of the overall median household income, or $42,000 to $126,000 annually in 2014—has fallen from a high of 61 percent in 1971 to 50 percent in 2015.

At the same time, the share living in the upper-income tier jumped from 14 percent to 21 percent over the same period, and the share in the lower-income tier rose from 25 percent to 29 percent.

“The hollowing of the middle has proceeded steadily for four decades, and it may have reached a tipping point,” the Pew study suggests. Furthermore, a “closer look at the shift out of the middle reveals that a deeper polarization is underway in the American economy.”

“The movement out of the middle-income tier has been more than just a step in one direction or the other,” the report says. “The fastest-growing segments are the ones at the extremes, the very lowest and highest ends of the income distribution.”

In addition, middle class families have fallen further behind financially, the study shows, with the share of U.S. aggregate household income held by middle-income households having “eroded significantly over time.”

“Upper-income households now command the greatest share of aggregate income and are on the verge of holding more in total income than all other households combined,” the report reads. “This shift is partly because upper-income households constitute a rising share of the population and partly because their incomes are increasing more rapidly than those of other tiers.”

The Pew findings support what many 2016 presidential candidates, led by U.S. Sen. Bernie Sanders, have been saying on the campaign trail.

In an op-ed published this summer, Sanders decried what he called “the war against the American middle class,” marked by Wall Street greed, anti-worker policies, and corporate tax evasion.

A Wall Street Journal/NBC News poll in January found that 47 percent of respondents considered reducing income inequality an absolute priority for the government to pursue this year, with Democrats placing far greater importance on it than Republicans.

In a piece for Gawker on Thursday, Hamilton Nolan responded to Pew report with an irreverent eulogy.

“The Middle Class, a popular figure in American folklore, died this week after a long battle with capitalism,” Nolan wrote. “Its passing has been expected since the recent death of its partner, The American Dream.”

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The American Dream Is Becoming A Nightmare And Life As We Know It Is About To Change

By Michael Snyder, on October 20th, 2015

We just got more evidence that the middle class in America is dying. According to brand new numbers that were just released by the Social Security Administration, 51 percent of all workers in the United States make less than $30,000 a year. Let that number sink in for a moment. You can’t support a middle class family in America today on just $2,500 a month – especially after taxes are taken out. And yet more than half of all workers in this country make less than that each month. In order to have a thriving middle class, you have got to have an economy that produces lots of middle class jobs, and that simply is not happening in America today.

You can find the report that the Social Security Administration just released right here. The following are some of the numbers that really stood out for me…

-38 percent of all American workers made less than $20,000 last year.

-51 percent of all American workers made less than $30,000 last year.

-62 percent of all American workers made less than $40,000 last year.

-71 percent of all American workers made less than $50,000 last year.

That first number is truly staggering. The federal poverty level for a family of five is $28,410, and yet almost 40 percent of all American workers do not even bring in $20,000 a year.

If you worked a full-time job at $10 an hour all year long with two weeks off, you would make approximately $20,000. This should tell you something about the quality of the jobs that our economy is producing at this point.

And of course the numbers above are only for those that are actually working. As I discussed just recently, there are 7.9 million working age Americans that are “officially unemployed” right now and another 94.7 million working age Americans that are considered to be “not in the labor force”. When you add those two numbers together, you get a grand total of 102.6 million working age Americans that do not have a job right now.

So many people that I know are barely scraping by right now. Many families have to fight tooth and nail just to make it from month to month, and there are lots of Americans that find themselves sinking deeper and deeper into debt.

If you can believe it, about a quarter of the country actually has a negative net worth right now.

What that means is that if you have no debt and you also have ten dollars in your pocket that gives you a greater net worth than about 25 percent of the entire country. The following comes from a recent piece by Simon Black…

Air France managers have been forced to flee the company’s headquarters after being attacked by a baying mob of workers that tore their clothes off.

Hundreds of angry staff stormed the Air France building at the Charles de Gaulle International Airport in Roissy, near Paris, after the company announced plans to cut 2,900 jobs on Monday.

Two senior executives, Xavier Broseta, Vice President for Human Resources, and Pierre Plissonnier, deputy of Air France long-haul flights, both had their shirts ripped off their backs as they were evacuated through the crowds.

Under attack: A shirtless Xavier Broseta, Executive Vice President for Human Resources at Air France, is evacuated by security after employees interrupted a meeting with representatives staff at the Air France headquarters building at the Charles de Gaulle International Airport in Roissy, near Paris

Shortly before the attack, Mr Broseta and Air France Chief Executive Frederic Gagey had outlined a drastic cost cutting plan, which would see 2,900 jobs cut by 2017.

The cuts include 1,700 ground staff, 900 cabin crew and 300 pilots, as part of efforts to lower costs, two union sources said.

Air France also confirmed in the meeting that it plans to shed 14 aircraft from its long-haul fleet, reducing the business by ten per cent, and that it wants to cancel its order for Boeing 787 Dreamliner aircraft.

This outraged staff, who are already at loggerheads with the company, and hundreds stormed the building, interrupting the meeting.

Mr Broseta and Mr Plissonnier were aided by security as they tried to escape the baying mob

Right Now There Are 102.6 Million Working Age Americans That Do Not Have A Job

By Michael Snyder, on October 4th, 2015

The federal government uses very carefully manipulated numbers to cover up the crushing economic depression that is going on in this nation. For the month of September, the federal government told us that 142,000 jobs were added to the economy. If that was actually true, that would barely be enough to keep up with population growth. Sadly, the truth is that the real numbers were actually far worse than that. The unadjusted numbers show that the U.S. economy actually lost 248,000 jobs in September and the government added more than a million Americans to the “not in the labor force” category. When I first saw that number I truly believed that it was inaccurate. But you can find the raw figures right here. According to the Obama administration, there are currently 7.9 million Americans that are “officially unemployed” and another 94.7 million working age Americans that are “not in the labor force”. That gives us a grand total of 102.6 million working age Americans that do not have a job right now.

That is not an economic recovery – that is an economic depression of an almost unbelievable magnitude.

This is something that my friend Mac Slavo pointed out the other day. I encourage you to read his analysis right here. If we measured unemployment the way that we did decades ago, we would all be talking about how similar Obama’s economy is to the Great Depression of the 1930s.

But instead we let the feds get away with feeding us this completely fraudulent “5.1 percent” unemployment number and most of us believe the mainstream media when they tell us that everything is just fine.

It has been a long time since the Bureau of Labor Statistics (BLS) published the real unemployment numbers for all Americans who fit the criteria of being able to work in the economy, but have not been able to find a job for one reason or another. Instead, the BLS has simply changed their data models numerous times since 1980, and now we have reached the point where there are actually more people between the ages of 16-54 who don’t have a job versus those in that same age range who do.

And with the Federal Reserve using these BLS numbers as the catalyst for whether to raise interest rates after nine years of them being pushed down to near zero, one regional central bank on Oct. 2 laid the blame for there being over 94 million Americans out of work and not counted in the unemployment models as simply ‘not wanting to get a job’.

There Are Not Enough Jobs, And Austerity Is To Blame

The September jobs report is spooking even the optimists.

The especially poor September jobs report reinforces what many economists have been saying for months: The six-year recovery from the Great Recession has been too weak to create enough jobs for America’s growing population, let alone restore significant wage growth.

Domestic fiscal austerity, not recent global volatility, is primarily to blame for the inadequate job growth, these economists argue.

The U.S. economy created 142,000 jobs in September, bringing average monthly job growth to 198,000 this year — way down from the monthly rate of 260,000 in 2014. Average hourly wages decreased slightly in September, meaning pay has risen just 2.2 percent in the past 12 months.

In addition, the percentage of the population working or looking for work has dropped to 62.4 percent, the lowest it has been during the Obama presidency. The progressive Economic Policy Institute estimates that we need 2.6 million more jobs to keep up with population growth.

French Recovery Fades as Manufacturing, Services Contract

An employee removes excess felt from berets inside the factory of 174-year-old… Read More

French manufacturing and services unexpectedly shrank this month, highlighting President Francois Hollande’s struggle to revive the euro area’s second-largest economy.

A Purchasing Managers Index of factory activity dropped to 49.3 from 51.2 in April, while a services gauge fell to 49.2 from 50.4, Markit Economics said today in London. Economists had forecast readings above 50, the level that divides expansion from contraction.

Hollande is grappling with an economy that stagnated in the first quarter as both investment and consumer spending fell. After two years in office, his government has yet to achieve two consecutive quarters of expansion, a performance that has driven jobless claims to an all-time high of 3.3 million and his own popularity to a record low.

French economy contracts while rest of eurozone keeps expanding

The strong pace of growth in the eurozone’s private sector eased very slightly this month, with drastic price cuts preventing any further slowdown, surveys showed yesterday.

Slower growth in activity at factories took the shine off an unexpected pickup in the service industry, although the bloc’s recovery appears to be gaining traction.

“This doesn’t change the picture of the eurozone having one of its best growth spells in the past three years. It’s broad-based – with the one exception being France,” said Rob Dobson, senior economist at survey compiler Markit.

Markit’s Composite Purchasing Managers’ Index, based on surveys of thousands of companies across the region and seen as a good indicator of growth, edged down to 53.9 from April’s near three-year high of 54.0, matching the forecast in a Reuters poll of analysts.

The Osram factory in Molsheim. French factories returned to growth with their strongest performance in 17 months. Photograph: AFP/Getty

Hopes of a recovery in the eurozone were lifted after private sector firms across the region reported a rise in output for the first time in 18 months, leading to predictions that the single currency bloc is on the cusp of exiting recession.

A strong performance by German manufacturers and a halt to the headlong decline in French business activity gave the eurozone a much needed boost after the area slipped into reverse last year.

With the US manufacturing sector expanding at a faster pace in July, the main blot on the global economic recovery was a decline in manufacturing output in China that some economists have warned could force Beijing to renew its stimulus spending or risk a hard landing.

China’s manufacturing sector tempered the eurozone data, slowing to an 11-month low as new orders faltered and the job market darkened.

The flash HSBC/Markit Purchasing Managers’ Index (PMI) fell to 47.7 this month from June’s final reading of 48.2, marking a third straight month below the 50 threshold between expansion and contraction for China.

As if to highlight concerns that global growth is slowing, Caterpillar, the US construction and mining business that is considered a bellwether of global business activity, downgraded its forecast for the pace of the global recovery this year and next.

Alexandra Knight, an economist at National Australia Bank, said the weak Chinese PMI posed a problem for countries that relied on exports to China.

“It adds to the concern about the outlook for demand, and brings into question just how strong Chinese commodities demand will be,” she said.

More than a quarter of people now classed as self-employed are hidden victims of the recession struggling by on low pay, a new report reveals.

The study by the Resolution Foundation think tank reveals the dark side of the sharp growth in self-employment, which has helped the Government to maintain its boast that unemployment is falling as more and more people find work.

Since the start of the recession five years ago, the number of self-employed has risen by 650,000 to 4.5 million. They now represent 15 per cent of the active workforce.

But the new analysis reveals that the average weekly income of someone in self-employment is 20 per cent lower than in 2008. As a result, a typical self-employed worker now earns 40 per cent than a typical employee. An Ipsos-Mori survey commissioned as part of the report also found that 27 per cent of those who became self-employed in the past five year do so because they had no other choice – up from 10 per cent five years ago.

Gavin Kelly, chief executive of the Resolution Foundation, said: “Self-employment is often a highly precarious existence which isn’t that well supported by public policy. High levels of self-employment seem likely to be here to stay and policy-makers have some catching up to do.”

The grim truth about pay and living standards in some the regions of the UK has also been highlighted by official EU figures showing that parts of Britain are effectively poorer that countries from former communist countries in Eastern Europe.

People in Cornwall and the Welsh Valleys are worse off than residents of Estonia and Lithuania, according to Eurostat figures comparing wealth across the EU using a measure known as “purchasing power standards” – which takes into account GDP per person and cost of living.

In addition, Durham and the Tees Valley, in the north east of England, are poorer than those in the wealthiest regions of Bulgaria and Romania, the two most deprived countries in the EU.

By contrast, the Eurostat figures show that London is the richest place in Europe.

According to the Resolution Foundation report, self-employed people are more likely than people in full time employment to complain of being under employed.

Pension fears for rising number of self-employed

The Resolution Foundation said the increase in self-employment also presented a “worrying picture of the security and vulnerability of self employed people”, who have traditionally saved less for retirement than employees.Photo: PA

By Szu Ping Chan

6:00AM BST 06 May 2014

Higher levels of self employment have become a permanent feature of the UK economy as a result of Britain’s ageing workforce and a greater desire for Britons to “work for themselves”.

The number of people who are self employed has grown by 650,000 since the 2008 financial crisis, to 4.5m, meaning one in seven workers is now self employed.

While some of the shift towards self-employment has been caused by cyclical factors, the Resolution Foundation said 73pc of workers had chosen to become self-employed. “The high self-employment numbers are here to stay,” said Laura Gardiner, a senior policy analyst at Resolution Foundation.

The rise in self employment has attracted attention from the Bank of England, where policymakers have argued over whether the increase reflects structural changes in the UK economy or “disguised labour market slack” because many of these workers would prefer to be working full-time.

While the Foundation said there was less slack in the economy caused by self-employment than some policymakers believed, it said underemployment among these workers was “marginally worse than for employees”, representing a reversal of the pre-crisis trend.

For the first time, benefit claimants are at risk of sanctions if they do not apply for and accept certain zero-hours jobs under the new universal credit system, despite fears that such contracts are increasingly tying workers into insecure and low paid employment.

Last week, the Office for National Statistics revealed the number of contracts that do not guarantee minimum hours of work or pay but require workers to be on standby had reached 1.4 million.

More than one in 10 employers are using such contracts, which are most likely to be offered to women, young people and people over 65. The figure rises to almost half of all employers in the tourism, catering and food sector.

Currently, people claiming jobseekers’ allowance are not required to apply for zero-hours contract vacancies and they do not face penalties for turning them down.

However, the change in policy under universal credit was revealed in a letter from Esther McVey, an employment minister, to Labour MP Sheila Gilmore, who had raised the issue of sanctions with her.

The senior Tory confirmed that, under the new system, JobCentre “coaches” would be able to “mandate to zero-hours contracts“, although they would have discretion about considering whether a role was suitable.

Separately, a response to a freedom of information request to the Department for Work and Pensions (DWP) published on its website reveals: “We expect claimants to do all they reasonably can to look for and move into paid work. If a claimant turns down a particular vacancy (including zero-hours contract jobs) a sanction may be applied, but we will look into the circumstances of the case and consider whether they had a good reason.”

Higher level sanctions – imposed if a jobseeker refuses to take a position without good reason or leaves a position voluntarily – will lead to a loss of benefits for 13 weeks on the first occasion, 26 weeks on the second occasion and 156 weeks on the third occasion.

Asked about the issue by the Guardian, the DWP said jobseekers would not be required to take a zero-hours contract that tied them in exclusively to work for a single employer. The government is already consulting on whether to ban this type of contract altogether.

The change has been made possible because universal credit will automatically adjust the level of benefits someone receives depending on the number of hours they work. This means claimants should not face periods without the correct benefits when their earnings fluctuate or they change job.

However, critics raised concerns that the new policy will force people into uncertain employment and restrict the ability of claimants to seek better work while still placing a burden on many to increase their hours.

Labour’s Sheila Gilmore said she was concerned about the situation because JobCentre decision makers already do not appear to be exercising enough discretion before applying sanctions under the old regime.

“While I don’t object to the principle of either universal credit or zero-hours contracts, I am concerned about this policy change,” she said. “I also fear that if people are required to take jobs with zero-hours contracts, they could be prevented from taking training courses or applying for other jobs that might lead to more stable and sustainable employment in the long term.”

Another bad sign for America’s middle class

You don’t have to be an economic victim of the Great Recession to know that America’s middle class is being squeezed in an unprecedented manner. Not only is the U.S. middle class no longer the world’s richest, according to recent research, but millions of families who were once financially secure are now living hand-to-mouth.

What’s going on? A new report from the National Employment Law Project finds that, nearly five years after the recession officially ended, most of the jobs that have been created during the recovery offer lower wages. Such positions made up 22 percent of jobs lost in the recession, but have accounted for 44 percent of employment growth.

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Where is the middle class heading?

The labor research and advocacy group also found that, from the outset of the recession in late 2007 to its low point in February of 2010, “employment losses occurred throughout the economy, but were concentrated in mid-wage and higher-wage industries.”

By contrast, mid-wage positions, which composed 37 percent of the jobs cut in the recession, have made up only 26 percent of those recovered. High-wage industries, which made up 41 percent of recession jobs lost, reportedly had a 30 percent recovery growth.

“Today, there are nearly 2 million fewer jobs in mid- and higher-wage industries than there were before the recession took hold, while there are 1.85 million more jobs in lower-wage industries,” NELP said in a statement,

Read More Here

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The low wage jobs explosion

Looking for a job? The ones you’ll find will likely be low wage.

The labor market has been recovering since the Great Recession ended, but many of the jobs created have been in low-wage industries, according to a new report by the National Employment Law Project, a left-leaning group.

Among the fastest-growing jobs: Food services, home health care and retail — all of which pay relatively little.

Better paying blue-collar industries, such as construction and manufacturing, have not recovered to their employment levels before the recession.

Lower wage industries accounted for 44% of employment growth since employment hit bottom in February 2010, the group found.

Going back to the start of the recession six years ago, the nation has added 1.85 million jobs in low-wage industries, but mid-wage and higher-wage industries have shed nearly 1 million positions each.

U.S. job growth jumps, but shrinking labor force a blemish

(Reuters) – U.S. employers hired workers at the fastest clip in more than two years in April, pointing to a rebound in economic growth after a dreadful winter and keeping the Federal Reserve on track to end bond purchases this year.

The brightening outlook was, however, tempered somewhat by a sharp increase in the number of people dropping out of the labor force, which pushed the unemployment rate to a 5-1/2-year low of 6.3 percent. Wage growth also was stagnant.

Nonfarm payrolls surged 288,000 last month, the Labor Department said on Friday. That was largest gain since January 2012 and beat economists’ expectations for only a 210,000 rise.

“It lends significant legitimacy to the positive tone in the wide array of post-February economic reports, which have all been consistently pointing to a significant pick-up in economic growth momentum this quarter,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

March and February’s data was revised to show 36,000 more jobs than previously reported.

U.S. stocks briefly rallied on the report, which was later eclipsed by rising tensions in Ukraine. Stocks ended lower, while safe-haven bids pushed the yield in the 30-year U.S. government bond to its lowest level in more than 10 months.

The dollar was flat against a basket of currencies.

About 806,000 people dropped out of the labor force in April, unwinding the previous months’ gains. That helped to push down the unemployment rate 0.4 percentage point to its lowest level since in September 2008.

The labor force participation rate, or the share of working-age Americans who are employed or unemployed but looking for a job, also fell four-tenths of a percentage point to 62.8 percent last month, slipping back to a 36-year low touched in December.

Overall, however, the data suggested the economy was gathering strength and led investors to pull forward their bets on when the Fed will start to raise interest rates.

The strong payrolls growth added to upbeat data such as consumer spending and industrial production in suggesting that sputtering growth in the first quarter was an aberration, weighed down by an unusually cold and disruptive winter.

Factbox

Discouraged job seekers behind shrinking labor force

People wait in line to meet a job recruiter at the UJA-Federation Connect to Care job fair in New York March 6, 2013.

Credit: Reuters/Shannon Stapleton

…
(Reuters) – Americans giving up the hunt for jobs were likely behind a sharp drop in the U.S. workforce last month, a bad sign for an economy that is struggling to achieve a faster growth pace.

The number of working-age Americans counted as part of the labor force — either with a job or looking for one — tumbled by 496,000 in March, the biggest fall since December 2009, the Labor Department said on Friday. That pushed the so-called workforce participation rate to a 34-year low of 63.3 percent.

March marked the second month in a row that the participation rate declined — 626,000 people have dropped from the work force since January.

Friday’s report showed a decline in the number of discouraged job seekers last month after a pop in February, which at first glance might suggest the drop in the workforce was mainly because of shifting demographics.

But a closer look at the underlying numbers raises questions about the notion that retiring baby boomers were the driving force behind the shrinking workforce.

“You have to think that it’s a large part demographics, but demographics are not really going to have such a big effect on month-to-month changes,” said Keith Hall, senior research fellow at George Mason University’s Mercatus Center.

Of the nearly 500,000 people dropping out, just 118,000 were aged 55 and older, meaning more than three-quarters of the increase came from below-retirement-age adults.

Also, the number of people 65 and older counted as part of the workforce actually rose by 27,000, which followed a 72,000 increase in February.

Hall said the sluggish economy was forcing some older Americans to continue working to rebuild retirement nest-eggs that were shattered during the 2007-09 recession.

Indeed, the participation rate for Americans between 55 and 64 years old held steady at a relatively high 65 percent. On the other hand, participation by the 25-29 age group was the lowest since record-keeping started in 1982.

“People are just giving up the search for work. A lot of them would like to work and they aren’t, that is a serious sickness in the economy,” said Peter McHenry, assistant economics professor at the College of William & Mary in Williamsburg, Virginia.

The drop in participation helped to lower the unemployment rate by a tenth of a percentage point to 7.6 percent. If the workforce had not contracted, the jobless rate would have risen two-tenths of a percentage point to 7.9 percent in March.

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